A vision for pensions in the digital age

Blending artificial and human intelligence within our industry has massive potential to improve the productivity and the quality of output from pension professionals.

Integrating artificial intelligence (AI) into human endeavour will give us the binocular vision to see (and work) through previously impenetrable problems. However, growing AI adoption brings with it an increased risk of cyber-attack, meaning that we need to embrace the opportunities of AI while re-doubling our cyber-resilience.    

Wide-scale adoption of AI is predicted to have the biggest impact upon society since the industrial revolution. The speed of adoption of AI apps has been record-breaking – ChatGPT took just five days to reach one million users.

How AI will affect pensions

Most sectors of the economy will be affected, and pensions are no exception.

The technology is likely to have the biggest impact upon data-driven and labour-intensive aspects of our industry, but it will reach all parts. It promises to dramatically change the potential and speed of data analysis, open up new possibilities for investment modelling, enable truly personalised member communications, and give members access to more meaningful robo-advice.

Even within the consultancy sphere, it will revolutionise the process of conducting research and drafting documents and advice.

To adapt the Olympic motto, by working together with AI we will be able to perform “faster, higher, stronger”. For our clients, this may mean that we can bring more sophisticated solutions, cost-effectively to smaller schemes.

For the end users of pensions, it may help to bring pension forecasts to life – perhaps in the form of an AI add-on to pensions dashboards.

However, these significant opportunities come hand-in-hand with a wide array of risks.

Two good examples are the risk of hallucination – AI technology making things up in an effort to be helpful – and the risk of intellectual property infringement, where the technology fails to respect the intellectual property rights in relation to digital information.

Another significant risk is that regulation will not be able to keep pace with the speed of technological advancement.

We are starting to see a growing body of domestic and international regulation. For example, the European Union’s AI act came into force on 1 August 2024. In the UK, the King’s Speech announced plans for both a Digital Information and Smart Data Bill and a Cyber Security and Resilience Bill within the next parliamentary session.

The latter may represent a departure from the decentralised regulatory approach that had been favoured by the previous government.

Cybersecurity issues

One of the major concerns for technology experts is that greater use of AI will see an increase in our vulnerability to cyber-attacks.

Of the companies surveyed by technology security specialist HiddenLayer, 77% had experienced breaches in their AI systems over the past year and 89% expressed concerns about security vulnerabilities associated with integrating third-party AI.

This might be because AI relies to some extent on quantum computing, which in turn tends to rely on cloud storage and cloud storage has an inherent vulnerability to cyber-attacks.

Meanwhile, Crowdstrike’s 2024 Global Threat Report noted a 75% increase in cloud environment intrusions from 2022 to 2023, and IBM’s Costs of Data Breach Report 2023 found that 82% of cyber breaches in 2023 involved data stored in the cloud.

AI can be used as a weapon in cyber-attacks or to enhance the effectiveness of a cyber-attack. The flip side of this is that AI can also be used to defend from cyber-attacks, meaning that we could observe an ‘arms race’ between good actors and bad actors using AI.

There is no doubt that AI is coming and coming fast – there is an irresistible force making it an inevitable part of all our working lives in the near future. It will bring many and varied opportunities and risks.

We will all see a significant impact upon our roles and how we conduct them. We should all be prepared to utilise the technology as our jobs quickly evolve.

But we also need to keep a beady eye out for more and more cyber-attacks that will be looking to gatecrash the AI party.    

Matthew Giles is a council member at the Society of Pension Professionals.

Further reading

Innovation Interviews: How Cardano embraces AI (26 June 2024)

Trustees ‘must be wary of cyber risks’ after BBC breach (6 June 2024)

The Pensions Regulator reacts as cyber-attacks on the increase (14 December 2023)